(1888PressRelease)
May 02, 2009 - CEOs are taking a hit from the recession, less total compensation, smaller bonuses, nearly worthless stock options, but their companies are already making adjustments that could mean fatter paychecks in the future.
An Associated Press analysis shows the median pay package for CEOs of companies in the Standard & Poor's 500 index fell 7 percent to $7.6 million in 2008.
And the potential hit to their pocketbooks could be even larger if stock prices don't rebound. One clue: 90 percent of the $1.2 billion in CEO stock options granted last year are under water, meaning the current stock price is too low to yield a profit, the AP analysis shows.
Boards already are trying to cushion the blow. The AP found that some have changed the rules to make it easier for executives to qualify for bonuses. Others are doling out more stock options, which give executives the right to buy shares in the future at prices locked in today.
Four of every five CEOs took home a cash bonus, despite the fact that the stock prices of the companies in the survey fell by an average 36 percent and profits fell 31 percent.
The median payout in cash for salary and bonuses fell 20 percent from a year earlier to $2.4 million. But that's still 48 times what the average U.S. worker makes, based on the most recent government figures.
Of the 10 CEOs who took the biggest pay cuts last year, four were heads of financial services companies. Overall, the heads of companies that develop and process raw materials, including supplies for construction, steel and glass, and paper products, took the biggest hit. That group's median compensation shriveled 26 percent to about $6.3 million.
Since the economic meltdown, pressure has grown from shareholders, Congress and President Barack Obama for boards of directors to rein in executive pay. But even with all that scrutiny, experts on CEO compensation say it's too soon to call the 2008 decline in pay the start of a trend.
"I wouldn't yet say this is a watershed moment for executive compensation. This is a watershed opportunity," said Katherine Davies, President of Morgan Singleton Associates in Seattle. "I am fearful too many boards won't take a hard stance to enforce significant change," the Morgan Singleton Associates President said.
There are already examples of corporate boards setting CEOs up for a potential windfall. Many made large stock grants in the first few months of 2009, when stock indexes dipped to levels not seen in more than a decade. The S&P 500 has rebounded more than 30 percent from its early March low, though it's off 44 percent from its October 2007 peak. Given the timing of the early 2009 stock awards, a sustained stock market recovery would supercharge the profits when these options are exercised.
Morgan Singleton Associates are highly respected within the financial community and have been providing accurate evaluations for over three decades. Working alongside Industry leaders Morgan Singleton Associates recognizes the dramatic need for major changes, with a passionate commitment to business growth.
Morgan Singleton Associates provides a full range of integrated services and products simultaneously directed at producing strategically predetermined business and cultural results. We bring together a broad range of talent and resources with a passion for integrity, continuous improvement and the desire to make a difference. This results in prosperity for our customers, society and ourselves.
###
